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Homestore.com Stumbles in the Red

Troubled online real estate behemoth Homestore.com Inc., as it had foreshadowed, posted a third-quarter pro forma net loss, excluding certain charges, of $6.9 million or 6 cents per share.

That compared to a pro forma loss of $19.8 million, or 19 cents a share, a year earlier.

Executives say the events of Sept. 11 and the general decline of Internet advertising led to the loss.

Revenues for the Westlake Village, Calif.-based company, at one time a Wall Street favorite for its sequential record of improving quarters, came in at $116.1 million, a 34 percent increase over pro forma revenue of $86.9 million for the third quarter of 2000.

The company also said it estimates that fourth quarter 2001 revenues will be between $95 million and $105 million, resulting in an estimated pro forma loss per share of 30 cents to 38 cents.

The company said it expects full-year 2002 revenue will be between $375 million and $425 million. Pro forma earnings per share, excluding certain items, for all of 2002, are estimated to be in the black to the tune of 8 to 17 cents a share.

The company said earlier this month that it expected to report a third-quarter pro forma loss of 1 to 6 cents a share on revenues of $114 million to $118 million. Analysts on average had been looking for a profit of 16 cents a share before guidance was altered.

On a fully diluted (GAAP) basis, the net loss for the third quarter was $106.6 million, or 96 cents per share, compared to a net loss of $27.1 million, or 33 cents per share, for the third quarter of 2000.

Advertising revenue represented 24 percent of total revenues for the quarter or $28.5 million, a decline of 44 percent from the previous quarter, the company said.

"In light of the changed business environment, we are taking the actions necessary to maintain our leadership position in the online real estate market," said Stuart Wolff, Homestore chairman and chief executive officer.

Homestore.com announced a major restructuring last week that included a 20 percent workforce reduction - 700 jobs - and subsequently was downgraded by Goldman, Sachs analysts "in light of earnings growth concerns, segment analysis and execution risk."

Much of the cutbacks will revolve around online advertising. Instead, the company says it is redoubling its efforts on its The Retail and Consumer Services Group, comprised of the company's iPlace, Welcome Wagon and Local Online businesses as well as the Real Estate Services Group, comprised of the company's REALTOR.com, HomeBuilder.com, and Homestore Apartments & Rentals.

The stock plunged as the company was taken off the GS Recommended List. Homestore closed Thursday at $4.99, down 15 cents. The company's 52-week high is $43; at one point in 1999 it traded for well over $100 a share.

GS expressed concerns that the company is overly dependent on ad revenues; that a substantial housing turnover slowdown may be materializing; and that real estate-related online advertising, is "now likely to be depressed."

For the six months ended June 30, Homestore.com revenues totaled $234.8 million, up from $88.8 million. Net loss totaled $139.2 million, up from $53.9 million.

Homestore's Web sites are organized into 10 categories: existing homes for sale, newly constructed homes, apartments and rentals, finance and insurance, moving, home improvement, decorating, lawn and garden, appliances and electronics and shopping for the home.